Pop! And Dropped: Funko Plummets On Earnings, But Analysts Stay Bullish

Funko Inc FNKO shares fell more than 15% Friday after reporting a third-quarter earnings miss and guidance that came in below Street estimates.

Funko reported adjusted quarterly earnings of 38 cents per share, which beat the consensus estimate of 32 cents. The company reported quarterly sales of $223.3 million, which beat the consensus estimate of $220.44 million. This is a 26.2% increase over sales of $176.915 million the same period last year. The comapny sees 2019's adjusted EPS in a range of $1.15-$1.22 versus the $1.24 estimate.

The Analyst

DA Davidson analyst Linda Bolton Weiser highlighted the company’s 26% sales growth, leading her to reiterate a Buy rating.

“Funko maintained its 2019 guidance, including EBITDA of $140M-$145M; 4Q has a hard comp due to initial Fortnite sales in 4Q18 and heavy investment spending,” the analyst wrote in a note.

According to Bolton Weiser, Harry Potter was the No. 1 property in the quarter, representing 9% of sales, followed by DC Comics, "Fortnite" and Marvel. The analyst also said the new Funkoverse board game also contributed to sales growth in the third quarter.

DA Davidson also raised its price target from $32 to $35.

Bank of America: Bullish On Earnings, Product Library

Bank of America analyst Alexander Perry also remained bullish, reiterating a Buy rating with a $29 price target.

“We believe U.S. wholesale momentum was driven by strong performance in the mass channel which increased +65% in 3Q as Walmart continued to expand its Funko product assortment,” Perry wrote.

Perry also said evergreen properties represented about 58% of sales in the quarter, up from 53% year-over-year, and says he believes Funko is not overly reliant on new content creation.

The analyst believes strong third-quarter momentum should continue into the fourth quarter led by continued U.S. wholesale strength in the specialty channel, significant growth at Walmart Inc WMT as the company gains additional shelf space, and continued expansion of the sports/music category led by expanded distribution at Foot Locker, Inc. FL.

Bank of America also believes Funko is taking the right steps in mitigating the tariff impact and does not expect an impact in 2019.